George Osborne delivers his most optimistic economic update yet - so what do the City pundits say?

George Osborne has delivered an upbeat update on the economy and was able to raise growth forecasts and cut borrowing predictions in his Autumn Statement today.

But financial markets, which have mostly priced in recent good news already, appeared to shrug off Osborne's jollier than usual economic bulletin.

The FTSE 100 has barely budged today, before or after the Chancellor's speech. And the yield on 10-year Government bonds - the benchmark interest rate the Government must pay to borrow on financial markets - was 2.9 per cent this morning and 2.91 per cent by early afternoon.

Unmoved: FTSE 100 and other financial indicators barely budged today, before or after the Chancellor's speech

Sterling was also little changed, trading at $1.6346 (61p) against the US dollar in the wake of the Autumn Statement versus $1.6356 before. It was at €1.2021 (83p) against the euro, compared with €1.2034 in early trading.

What does the City say?

Howard Archer, economist at IHS Global Insight, said: 'This has obviously been the most pleasing Autumn Statement for the Chancellor to deliver with the UK growth forecasts for 2013 and 2014 revised up significantly and the government deficit and public debt projections revised down substantially over the medium term.

'However, the Chancellor is very aware that it still does not feel like economic recovery to many people given the squeeze on their living standards and that the Labour Party are making this a major political battleground.'

He went on: 'The Chancellor is trying to boost support for the government by stressing that the recent marked improvement in the economy shows that the government’s economic plan is working and that its austerity push has been the correct policy.

'To ram home this point, Mr. Osborne highlighted that revised data shows that the economy contracted by 7.2 per cent during 2008/9 rather than 6.3 per cent as previously reported. He did this to emphasize the dire economic situation that the government inherited and to try and press home the point that Labour cannot be trusted with the economy, especially as they have lost the austerity debate.'

Archer adds: 'Although the Chancellor is stressing that the government is sticking firmly to its fiscal course, the suspicion has to be that with the next general election due to take place in May 2015, he is keeping some wiggle room for sweeteners in the budget for 2014/15 that he could announce in his 2014 Autumn Statement.

'Meanwhile, the UK’s markedly improved growth performance and outlook, and the accompanying downward revisions to government borrowing requirements and debt levels has significantly increased the chances that the UK will hold on to its last AAA credit rating, which it currently holds with Standard & Poor’s.'

Nancy Curtin, chief investment officer of Close Brothers Asset Management, said: 'Following a flurry of strong economic news, George Osborne was firmly on the front foot as his plan A was vindicated by the Office for Budget Responsibility’s figures.

'The state of the economy is a world away from its precarious position at the time of the last Budget, when fears of a triple dip lingered.

'Exports have shown recent signs of improvement despite a disappointing performance in the third quarter, and Osborne’s announcement that he plans to encourage economic development with emerging economies offers further encouragement for the future.

'What’s more business investment is now climbing, and the consumer is playing an increasingly important role in the broad-based economic revival.

Reasons to be cheerful: Chancellor George Osborne with Prime Minister David Cameron, laughing at the response from Labour's Ed Balls to the Autumn statement

'The Chancellor is by no means stepping from his path of austerity. But, as growth continues to accelerate and austerity declines as a proportion of GDP, we are feeling their effects less keenly than before.

'As he puts it, they are committed to "fixing the roof when the sun shines". However, the government now has even more room to manoeuvre, and support for consumers, retailers and infrastructure following the recent refocusing of Funding for Lending should all boost growth in 2014. It seems support for businesses is back on the agenda.'

Peter Spencer, economic advisor to EY ITEM Club, said: 'As expected, the bounce-back in the economy is bringing borrowing down faster than was thought likely at the time of the Budget. Borrowing is likely to be £9billion lower this year, with similar reductions pencilled in for the future.

'However the OBR is stressing that this is a cyclical rather than an underlying improvement, signalling that this is not an opportunity for a fiscal relaxation.

'The Chancellor concurs and has set out a plan that is fiscally neutral over the longer term. His measures reduce borrowing by about £2billion in the near term, but then give some of this back over the next three years. But it is basically a recipe for four more years of austerity.

'The fiscal measures were flagged up well in advance. It was interesting that the Chancellor failed to mention energy policy in his speech. The re-occupation relief for the High Street was a new initiative but it remains to be seen who the new occupants will be.

'As the Chancellor noted, the OBR’s near term forecasts are a great improvement on the Budget projections. Longer term, the OBR's growth forecasts are more cautious.

'Yet their longer-term revenue projections are better, revealing a more optimistic view of the HMRC's ability to raise revenue. This reflects the Chancellor's old friend fiscal drag as well as his tax evasion and avoidance measures, which continue the campaign of previous statements.'

Jason Hollands, managing director at Bestinvest, said: 'The Chancellor was in combative form today, willing to take no prisoners.

'And the two overarching messages were: the recovery is gathering pace but there must be no let-up in austerity. In fact the message on curtailing government spending was "harder, faster, deeper".

'Yet in talking up the improving employment numbers, with unemployment forecast to reduce to 7 per cent by 2015, that also raises the prospect of a turn in the interest rate cycle much earlier than the Bank of England and Chancellor have guided.

'It provides a warning shot for anyone over extending themselves to get on the house ladder at current rocketing prices. Worryingly, household debt has been rising sharply over the last 12 months

'There were some big headline grabbers; further rises in the State retirement age (catching up with reality), help for small businesses, higher taxes for non-residents owning UK property, confirmation of a part transferable personal allowance between couples on basic rate tax, a crackdown on tax avoidance, a freeze on fuel duty and an National Insurance Contribution holiday for firms employing under 21-year olds.

'Mooted moves against the tax-free pension lump sum and a lifetime cap on Isas thankfully didn’t appear. And neither did a rumoured move to allow peer-to-peer lending to take place within Isas.'

'There’s the risk of a whipsaw in house prices and further financial stress when inflation pressures eventually force base rates higher.

'That day of reckoning may not come for a while, however. Sterling strength and a slowdown in China are likely to see an easing of inflation pressures over the next year or two. A fall in the cost of living would reverse the real income squeeze that made the 2010-12 period so painful and it would keep interest rates lower for longer.

'UK growth should remain strong. We expect to see further strength in the pound and good performance from the more domestically-focused mid cap area of the stock market.'